Thinking About Late Payment

According to the latest edition of the European Payment Report 2021 by Intrum, their research has led to half of companies surveyed saying they were lucky to have survived 2020.

Many businesses have taken the opportunity during the pandemic to tighten payment terms and focus on liquidity. Cash flows and revenues have proved more resilient to the pandemic than expected, according to a third (34 per cent) of UK businesses - above the European average. However, UK firms were also more likely than their European counterparts to have made redundancies – with one in five doing so.

Over a half of UK firms say the pandemic has prompted them to get better at managing the risk of late payments. The report shows that businesses have tried to cut payment times and become stricter about their payment terms to customers. In 2021, 50 per cent said they had accepted longer payment terms than they are comfortable with in order to protect the customer relationship – although high, this is down from 80 per cent in 2020.

The payment gap (the gap between agreed terms and the actual time taken to pay) has also narrowed across all customers types, falling from ten days to eight for consumers, 19-12 days for B2B customers and 23-11 days for the public sector. The pandemic has clearly focused minds on late payment – 56 per cent said it has increased their awareness of the impact this has on small businesses.

However, it is not clear that his will create lasting change, and almost two-thirds (62 per cent) are more concerned than ever before about their customers’ ability to pay, predicting that the risk of late payments will increase over the next 12 months. In addition, 46 per cent believe the payment gap is a real risk to the sustainable growth of their business.